I guess many people are wondering where does the global stock markets are heading as 2008 is ending its note for 2009 to step into center stage. Some said that the stock market had bottomed while some said gloomy news still looming ahead till 2010. TradeOrInvest would like to address this from the perspective of investing and trading as these two businesses are different in nature. So, is it true that the market big move is coming soon after days of consolidation? After many days of waiting for the market trend to unveil itself, I would say that another opportunity to short is coming soon. Why I say so? Just look at the hourly candlestick chart for FKLI Dec contract.
From the hourly chart for Malaysia FKLI Dec contract, we could see that the KLCI and its index futures are consolidating upwards since 2nd Dec 2008. As we draw the diagonal trendline from 891 points down to 862 points, we could see that the stock market faithfully touched the resistance points and fall from there. Again if we draw a diagonal trendline from 831 points up to 847 points, we could see that the FKLI rebounded every time it touched the support levels as defined by the trendline. With these two trendlines, we could actually make money by shorting the index futures at the top of the triangle chart pattern and long at the bottom as it touches the supporting diagonal trendline. With this picture, we could see what the KLCI and its index futures FKLI wanted to do. Let us explore more information by using other various market analysis methodologies.
From the Fibonacci perspectives, we could see that the FKLI had rebounded by about 75% from its low of 831 points against the high of 876.5 of the previous wave. We could also see that FKLI fall after touching the Fibonacci 38.2% retracement level at 848 points as well as the Fibonacci 61.8% retracement level at 859.5 points. At current moment, the FKLI is trading at that 61.8% level. That is the power of Fibonacci.
From the Elliott Wave Theory perspectives, we could see that the upward consolidation of FKLI has 1 or 3 waves and also forming an Elliott Wave triangle chart pattern. This is a corrective move against the previous wave. So, we could more likely to expect a breakdown rather than a breakout upwards as the prevailing impulse wave continues it trend downwards. As for timing, we could only expect the triangle chart pattern to narrow down until a breakdown or breakout to be trigger as a trading signal.
As of my previous twitter message on FKLI market update, I mentioned that we should turn long if FKLI closes above 865 on the daily chart. Keep that in mind. Remember, it must be on a daily FKLI stock chart and it must be based on closing price.
As for investing in equity market for KLCI, I would say that we better stay out. Only trading in FKLI would be advisable as Bursa Malaysia does not permit short-selling on Malaysia equity markets. The crucial level to watch for is 930 points. We could go into long position for shares if KLCI move above 930 points level. If it breaks the 1,000 points level, that would even be better. Better be safe than be sorry. Better be late and catch the right worms rather than the snake’s tail.
So, the conclusion is to watch the stock market closely using the hourly intraday chart and see if the FKLI breakout or breakdown as the triangle chart pattern coming to an end. The crucial level to watch for is 852 points. I wish all the best to my fellow traders.
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